Grim outlook for Friday’s NFP – Market Overview – December 3

By: Miguel A. Rodriguez

16:44, 03 December 2020

After the publication yesterday of the ADP Non-farm employment figure, the Dollar fell again strongly against all currencies.

The figure disappointed the market by registering a much lower than expected number of non-agricultural job creation in the private sector, 307k vs. 410k.

This figure, which usually has less impact on the market than the one published tomorrow, the Non-Farm Payroll, is sometimes considered an advanced figure of the second.

For this reason and taking into account that the current objective of the Federal Reserve's monetary policy is to reduce the unemployment rate, the market reacted with additional sales of Dollars to the possibility that the Federal Reserve not only maintains its policy of interest rates at historical lows but intensify it with increases in the amount of the asset purchase program or more cuts in interest rates.

All this if the non-farm payroll figure and the unemployment rate, not only tomorrow's but also the next ones, remain without significant advances or with setbacks like the one experienced yesterday by ADP Non-Farm employment.

On the other hand, there was also positive news yesterday. The Republican representative in the US Congress said that significant agreements were being produced in the negotiations with the Democratic Party on the fiscal stimulus package. If true, it is likely that before the end of the year, the first advance of this budgetary policy measure will be approved, which would be very welcome by the market.

Meanwhile, and awaiting confirmations, the stock indices continue to fluctuate with slight advances and retreats.

Still, they remain in the high part of their price in recent days, representing the North American index's historical maximums.

In the case of the Dow Jones 30, it moves around the 30,000 zone, which in the short term is the resistance level to overcome to make way for higher gains.

Above this level is the historical maximum of 30165 reached on November 25.

This environment of greater optimism in the market has also affected the Dollar's depreciation, which ceases to act as a safe-haven currency and experiences capital outflows.

EUR/USD was bought with momentum yesterday, for this reason, surpassing the 1.2100 level and entering an area where it does not find a reference that can be considered as resistance until the price concentration zone around 1.2240 and 1.2450.

The predictions of the central global investment banks are that of a significant appreciation of the pair shortly. Today Deutsche Bank has published its forecast for 2021, which places it at 1.3000.

GBP & Brexit

This bank also foresees that the Pound Sterling will appreciate against the Dollar; specifically, it sees the GBP/USD pair at 1.4600 for next year.

In this case, it is affected by the Dollar's weakness and anticipates a satisfactory agreement in the Brexit negotiations. These negotiations have still not reached an acceptable agreement; according to the participants, both from the European Union and the United Kingdom, they are stuck with the issue of fisheries, and in this sense, France has declared that they will not give in and that it would block any agreement that does not include a right to fish in British waters that they consider reasonable.

But the market seems to have ignored this threat of blocking and is still betting on the British Pound that has already broken the critical resistance zone of 1.3400. From a technical analysis point of view, a daily and weekly close at these levels paves the way for further gains to the next level around 1.3800.

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